Corporations or politicians hurting America?

While US corporations continue to complain about tax breaks they see as needed in order to compete with China and India, politicians grumble about the decline of US influence. No one is talking about how the US got where it is now.

China and India continue to develop into economic power houses in part to the expansion of US corporations into global markets, spending billions abroad and hiring overseas. Even so, corporations have managed to convince many Americans and politicians that helping them, helps America.

Karl Denninger, the editor and founder of The Market Ticker explained that taxing corporations more ends up hurting the consumer, but the tax code is the problem because it favors some over others and needs to be simplified.

“The tax code is a problem in the United States,” said Denninger. “If you were to simplify it to something that would fit on one piece of paper that would be a net positive for American corporations and American taxpayers, but I don’t know that they’re going to actually go down that road.”

Last year, 1.4 million jobs were created abroad while less than 1 million were created in the US. And there needs to be at least 150,000 jobs a month to account for population growth in the US. However, recent statistics indicate the unemployment rate is falling.

“What we have is a falling participation rate, that is the number of people working compared to the number of adult citizens in the population as a whole,” he explained. “What I remain concerned about is that the reason the unemployment rate is coming down is because people are giving up and leaving the work force. Some of that is dues to being discouraged, some of that is due to the fact the baby boomers are starting to retire.”

For tax purposes, the government needs people to work and needs the workforce to grow, as more people give up and others retire, the government loses that workforce.

The system must change in order to solve the problem, argued Denninger. The US needs to address the health care system, the tax code and more. He explained that a system of entitlement thinking drives these issues and neither party will tackle that problem. As it is, the system forces corporations to handle costs for certain groups who never pay, pushing those costs onto middle class Americans and hurting both corporations and consumers.

“We have to address these problems,” he added.

Looking forward, Denninger said he believed major tax reform will be a 2012 US campaign issue, however, little will be done until then.